Dive Brief:
- Minnesota, a haven for processed food companies, finds itself in a bind as the processed foods category begins to fall out of favor with consumers, driving sales down for some of these companies.
- According to MPR News, "Packaged food makers including General Mills and Hormel, ingredient suppliers like Michael Foods and Cargill, and retailers and wholesalers such as Supervalu, Schwan's and Target generate more than $300 billion in annual revenue."
- In addition to changed consumer preferences, other issues these companies have to contend with include the egg and poultry shortages caused by the bird flu outbreak that recently swept through the Midwest as well as a diminished supply and higher prices for vegetables grown in California.
Dive Insight:
Few companies seem to be immune to the decline in processed foods consumption. Hormel's Jennie-O Turkey Store brand and Post's Michael Foods have taken significant hits from the bird flu, leading Hormel to lay off some of its workforce and Michael Foods to sue an egg farm over the diminished egg supply needed for its egg-based products. General Mills' vegetable brands have seen some complications due to California's vegetable shortage as well, according to MPR News.
Likely driving down processed foods sales other than these external factors are consumer perceptions of this food category. Today's consumers expect foods to be made with simpler and healthier ingredients, which is not always common of processed foods. As a result, several companies have moved to appeal to consumers by removing artificial ingredients, including recent announcements by General Mills' removal and Nestle.
The dilemma for foods companies is to not just make their foods healthier but to do so in a way that appeals to today's consumers. Companies may face decisions such as whether to remove artificial ingredients versus using alternative sweeteners to make a product diet-friendly. Determining which change is a better move may depend on market research and other factors that go into such a change specific to that company. Either way, fast adoption to this health trend is proving critical for processed foods companies at this time.